Asha Javeed

Lead Ed­i­tor In­ves­ti­ga­tions

asha.javeed@guardian.co.tt

The Na­tion­al In­sur­ance Board (NIB) is call­ing on the Gov­ern­ment to give con­sid­er­a­tion to in­creas­ing the con­tri­bu­tion rate that em­ploy­ers and em­ploy­ees pay. That’s be­cause there is a bil­lion-dol­lar gap be­tween what is earned in con­tri­bu­tions and what is paid out in pen­sions and claims by the NIB.

The last rate in­crease was in Sep­tem­ber 2016 where the con­tri­bu­tion rate moved from 12 per cent to 13.2 per cent and was based on the 9th Ac­tu­ar­i­al Re­view.

Fol­low­ing pub­li­ca­tion of the 10th Ac­tu­ar­i­al Re­port, the fol­low­ing rec­om­men­da­tions were made: In­crease the con­tri­bu­tion rate to 16.2 per cent, min­i­mum pen­sion should be frozen, and grad­u­al­ly in­crease the re­tire­ment age from 60 to 65.

Last year, the Gov­ern­ment be­gan dis­cus­sions on in­creas­ing the re­tire­ment age.

With the pub­li­ca­tion of the 11th Ac­tu­ar­i­al re­view im­mi­nent, these rec­om­men­da­tions are ex­pect­ed to be re­assessed for how the NIB should man­age the fund sus­tain­ably.

In the NIB’s 2022 fi­nan­cial re­port, ex­ec­u­tive di­rec­tor Niala Per­sad-Po­li­ah said that con­sid­er­a­tion has to be giv­en to in­creas­ing the con­tri­bu­tion rate.

“Notwith­stand­ing our best ef­forts at max­imis­ing in­vest­ment re­turns, ef­fi­cient­ly man­ag­ing the op­er­a­tions of the NIBTT and even if sig­nif­i­cant com­pli­ance is achieved, it re­mains a fact that in or­der for the NIS to be able to cov­er all its li­a­bil­i­ties in the fu­ture, se­ri­ous con­sid­er­a­tion must be giv­en in the short-term to ei­ther in­creas­ing con­tri­bu­tion rates, mak­ing an ap­pro­pri­ate ad­just­ment to the ef­fec­tive re­tire­ment age, or both.

“The para­met­ric changes to the sys­tem pro­posed in the 10th Ac­tu­ar­i­al there­fore re­main an ur­gent mat­ter to be ad­dressed mov­ing for­ward to en­sure sus­tain­abil­i­ty. With the im­pend­ing fi­nal­i­sa­tion of the 11th Ac­tu­ar­i­al Re­view in ear­ly FY2023, it is ex­pect­ed that we will soon have up­dat­ed pro­jec­tions on the sus­tain­abil­i­ty of the NIS,” she said.

The con­tri­bu­tion amount is paid by the em­ploy­er and the em­ploy­ee in a pro­por­tion of two-thirds/one-third re­spec­tive­ly.

The Sun­day Guardian was told that while rec­om­men­da­tions were made to the Min­istry of Fi­nance ahead of Bud­get 2023, the Gov­ern­ment will like­ly kick the prob­lem down the road.

The dif­fer­ence be­tween in­come and ex­pen­di­ture has been a thorny point for the NIB and it has ad­vo­cat­ed for changes—in­creas­ing the con­tri­bu­tion rate and in­creas­ing the re­tire­ment age to 65. The pan­dem­ic ex­ac­er­bat­ed the is­sue for the NIB.

Dip­ping in­to in­vest­ments

As it stands, for the NIB to meet its ex­pen­di­ture, it has to dip in­to its in­vest­ments.

In 2022, the NIB made its largest with­draw­al, to date, from its in­vest­ment in­come—$1.259 bil­lion—to fi­nance this short­fall.

For 2022, ex­pen­di­ture amount­ed to $5,728.90 mil­lion and the con­tri­bu­tion was $4,530.15 mil­lion.

Since 2016, the NIB has dipped in­to its in­vest­ments to fi­nance its ben­e­fits:

• In 2016, that sum was $261.54 mil­lion

• In 2017, it de­clined to $140.26 mil­lion

• In 2018 it was $226.16 mil­lion

• In 2019, it in­creased to $664.65 mil­lion

• In 2020, it was $916 mil­lion

• In 2021, it was $1,065 bil­lion

• In 2022, it was the high­est at $1.259 bil­lion

Ac­cord­ing to its 2022 fi­nan­cial re­port, the in­sti­tu­tion’s in­vest­ment port­fo­lio record­ed a de­cline in the last fi­nan­cial year.

Per­sad-Po­li­ah not­ed that NIBTT’s in­vest­ment port­fo­lio stood at $29.04 bil­lion as at June 30, 2022, re­flect­ing a 2.64 per cent or $786.74  mil­lion de­cline over the fund size com­pared to a year ear­li­er.

“The de­crease in the port­fo­lio’s mar­ket val­ue was at­trib­ut­able to ap­prox­i­mate­ly $598.67 mil­lion in un­re­alised loss­es as well as the with­draw­al of TT$1.36 bil­lion to fi­nance the Na­tion­al In­sur­ance (NI) Sys­tem deficit,” she said in her re­port.

“As such, the over­all per­for­mance of the NIBTT’s in­vest­ment port­fo­lio was sig­nif­i­cant­ly re­strict­ed by with­drawals of $1.36 bil­lion from the In­vest­ments Cash Ac­count to fi­nance the NI sys­tem short­falls. Against this back­drop, the over­ar­ch­ing ob­jec­tive of the NIBTT’s in­vest­ment port­fo­lio for the fi­nan­cial year con­tin­ued to be mit­i­gat­ing the fund’s liq­uid­i­ty risk and pro­vid­ing the nec­es­sary liq­uid­i­ty sup­port to the Na­tion­al In­sur­ance op­er­a­tions.”

In 2013, con­tri­bu­tion in­come fell for the first time be­low ex­pen­di­ture.

For the pe­ri­od 2018-2022, ex­pen­di­ture was more than con­tri­bu­tions. (See Com­par­a­tive Ta­ble)

“This is a fore­bod­ing de­vel­op­ment be­cause the short­fall in Con­tri­bu­tion In­come has been fi­nanced by In­vest­ment In­come—which can­not be rein­vest­ed for the fu­ture ben­e­fit of the NIS—and will even­tu­al­ly re­sult in the de­ple­tion of as­sets,” chair­man Patrick Fer­reira not­ed in his state­ment in the fi­nan­cials.

Con­tri­bu­tions

In 2022, the num­ber of con­trib­u­tors in the Na­tion­al In­sur­ance Sys­tem (NIS) were 455,448—an in­crease of two per cent from 446,116 in 2021, 404,197 in 2020 and 420,638 in 2019.

Con­tri­bu­tion In­come in 2022 was $4,530.15 mil­lion, an in­crease of 0.44 per cent when com­pared to $4,510 mil­lion in 2021.

How­ev­er, there has been a steady in­crease in ben­e­fi­cia­ries—it moved from 202,800 in 2019 to 204,613 in 2020 to 206,569 in 2021 to 214,490 in 2022.

The 214,490 ben­e­fi­cia­ries re­ceived a to­tal of $5,728.90 mil­lion in ben­e­fit pay­ments—a 3.5 per cent in­crease in ex­pen­di­ture over the pre­vi­ous re­port­ing pe­ri­od.

As it stands, NIB has an as­set base of $30.24 bil­lion with to­tal funds amount­ing to $29.94 bil­lion with its port­fo­lio com­pris­ing 8.34 per cent of the en­tire fi­nan­cial sec­tor of T&T.

“This un­der­scores the sig­nif­i­cance of the NIBTT to the na­tion­al land­scape. This sig­nif­i­cant as­set base must be viewed in the con­text of the cur­rent and most crit­i­cal chal­lenge be­ing faced by the NIS, name­ly an age­ing pop­u­la­tion. This phe­nom­e­non is char­ac­terised by a shrink­ing con­trib­u­to­ry base and an in­creas­ing num­ber of ben­e­fi­cia­ries. The NIBTT is al­ready see­ing sig­nif­i­cant signs of this, with the num­ber of re­tire­ment ben­e­fi­cia­ries grow­ing by more than 300 per cent over the last 25 years,” Fer­reira said.

He not­ed that NIB’s over­all re­turn in its In­vest­ment Port­fo­lio was 4.57 per cent, while Net Re­alised Earn­ings from in­vest­ments was in the or­der of $1.23 bil­lion.

“How­ev­er, this did not pro­vide us with the abil­i­ty to cov­er the en­tire short­fall be­tween to­tal rev­enue and to­tal ex­pen­di­ture,” he said.

He said for the NIB to meet its strate­gic ob­jec­tives, it needs a 13 per cent an­nu­al rate of re­turn on in­vest­ments.

Ben­e­fi­cia­ries

For 2022, there were 214,490 ben­e­fi­cia­ries who re­ceived a to­tal of $5,728.90 mil­lion in ben­e­fit pay­ments. This rep­re­sent­ed an in­crease in ex­pen­di­ture of 3.51 per cent over the pre­vi­ous re­port­ing pe­ri­od—in 2021, there were 181,147 ben­e­fi­cia­ries, an in­crease of 2.11 per cent over the 177,410 record­ed in 2020.

The NIB’s biggest cost is its pen­sion plan—it cost $4,723.84 mil­lion in 2022 or 86.92 per cent of the to­tal Long-Term Ben­e­fit Ex­pen­di­ture. In 2021, pen­sion amount­ed to $4,548.58 mil­lion or 86.52 per cent of Long-term Ben­e­fit Ex­pen­di­ture.

Con­verse­ly, short-term ben­e­fits, which in­clude Sick­ness Ben­e­fit, Ma­ter­ni­ty Ben­e­fit, Spe­cial Ma­ter­ni­ty Ben­e­fit and Fu­ner­al Grant, cost $224.99 mil­lion or 3.93 per cent of To­tal Ben­e­fit Ex­pen­di­ture.

This rep­re­sents an in­crease from $200.82M from 2021.

The pay­ment of fu­ner­al grants sig­nif­i­cant­ly in­creased  by 41.8 per cent—to $94.81 mil­lion in FY2022 up from $66.86 mil­lion in 2021.

State the biggest debtor, ow­ing $240M

Yet as it stands, the Gov­ern­ment,  through sev­er­al state en­ter­pris­es, is the biggest debtor to the NIB. Ac­cord­ing to doc­u­ments ob­tained by the Sun­day Guardian, sev­en of NIB’s top ten debtors, as at June 30, are state en­ter­pris­es and gov­ern­ment min­istries.They owe the in­sti­tu­tion about $240 mil­lion

Here is how they rank:

• Na­tion­al Main­te­nance Train­ing and Se­cu­ri­ty Com­pa­ny Lim­it­ed (MTS)–the debt is $75,396,798.29. The debt is for the pe­ri­od Oc­to­ber 1, 2017 to May 31, 2020. The Sun­day Guardian un­der­stands that the NIB is seek­ing ap­proval to ini­ti­ate le­gal ac­tion be­cause MTS has in­di­cat­ed that it is un­able to liq­ui­date the debt.

• Sure Se­cu­ri­ty Ser­vices Lim­it­ed–their debt is at $40,575,844. This is for the pe­ri­od Jan­u­ary 1, 2008 and April 30, 2018. On No­vem­ber 2, 2022, the NIB ob­tained a judg­ment against the com­pa­ny for the sum of $38,644,094.66. To date, no pay­ment has been made to the judg­ment debt. The NIS is al­so con­sid­er­ing pur­su­ing fur­ther le­gal ac­tion.

• Min­istry of Ed­u­ca­tion–The min­istry’s debt is $35,969,191 for the pe­ri­od Sep­tem­ber 2003 to De­cem­ber 2008. The mat­ter is un­der in­ves­ti­ga­tion by NIB’s re­cov­er­ies de­part­ment with an on­ward fur­ther meet­ing to be arranged to rec­on­cile the fig­ures.

• Wa­ter and Sew­er­age Au­thor­i­ty (WASA)–the debt is $16,852,521.11. WASA has in­formed the NIB that the debt is statute barred. How­ev­er, the NIB’s le­gal ad­vice is for the mat­ter to be es­ca­lat­ed to the chair­man of both en­ti­ties for dis­cus­sions in set­tling the mat­ter go­ing for­ward.

• Min­istry of Sci­ence, Tech­nol­o­gy and Ter­tiary Ed­u­ca­tion–Debt is at $23,424,687.05 for the pe­ri­od June 2001 to June 2009. An in­ves­ti­ga­tion is un­der­way to rec­on­cile the fig­ures with the min­istry.

• Uni­ver­si­ty of Trinidad and To­ba­go–The debt stands at $21,024,289.98 for the pe­ri­od Oc­to­ber 1, 2005 to De­cem­ber 31, 2014. The mat­ter is be­ing in­ves­ti­gat­ed by the Re­cov­er­ies De­part­ment.

• Em­ploy­ment Train­ing Pro­gramme–The debt stands at $16,539,687.76 for three pe­ri­ods–Oc­to­ber 2001, Oc­to­ber–No­vem­ber 2002 and Oc­to­ber-No­vem­ber 2003. The NIB is con­sid­er­ing le­gal ac­tion as the em­ploy­er has in­di­cat­ed it is un­able to liq­ui­date its debt.

• East Side Bak­ers Com­pa­ny Lim­it­ed–the debt is $15,617,672.81 for the pe­ri­od Sep­tem­ber 26, 2013 to Oc­to­ber 31, 2018. The com­pa­ny has agreed to en­ter in­to a promis­so­ry note to pay $10,000 a month for a pe­ri­od of six months and ne­go­ti­ate a high­er month­ly pay­ment there­after. They now pay $12,500 a month.

• Min­istry of Na­tion­al Se­cu­ri­ty–Fire Ser­vice of Trinidad and To­ba­go, the debt is $12,221,376.64 for pe­ri­ods be­tween 2016 to 2018. Ne­go­ti­a­tions are un­der­way to ad­dress the debt.

• Re­li­a­bil­i­ty Main­te­nance Ser­vices–the debt is at $11,309,881.91 for the pe­ri­od Jan­u­ary 1, 2008 to Au­gust 31, 2014. The com­pa­ny makes month­ly pay­ments of $100,000 to the NIB.

The Min­istry of Fi­nance had an amnesty for pay­ment of out­stand­ing NIS con­tri­bu­tions, with­out hav­ing to pay in­ter­est and/or penal­ties, from De­cem­ber 31, 2022 to Jan­u­ary 31, 2023.

By Jan­u­ary 6, ac­cord­ing to a press re­lease from the min­istry, the NIS amnesty had raised $90 mil­lion of the es­ti­mat­ed $161 mil­lion it ex­pect­ed.